Posted by: Josh Lehner | August 16, 2019

Potpourri Friday: Age Distribution, Portland, and Timber

Three quick charts this week on items I’ve been working on and being asked about during presentations.

First, an updated look at the age distribution in Oregon. Obviously there is variation within these groups, but the combination of the age distribution itself plus migration patterns underpins our previous look at future economic growth across the state. A few things stand out.

Rural Oregon has a higher share of middle-age and older residents. This is no breaking news, but as our office has tried to highlight repeatedly, the demographic drag of retirements on the local labor force is largely about folks aging from their 50s (peak working/income years) to their 70s (vast majority of people are retired). Most rural areas in Oregon are largely through the biggest part of this transition. In the coming decade, the demographic impact is less than it has been in the past decade. Additionally, rural Oregon has proportionately the same number of children as urban Oregon.

Oregon’s secondary metros have a pretty even age distribution. This is partly a composition issue where the differences in each area offset one another. For example, Salem is home to a larger share of children, while Corvallis and Eugene’s 18-24 year old populations are large given the universities. But overall, there are no clear imbalances.

The Portland region attracts 20-something as young adults leaving the nest move to the big city in search of jobs. But Portland’s largest age differences are actually seen among the 60+ age chorts, which are relatively small.

Second, speaking of Portland — and this comes up quite frequently in presentations — the region is effectively half of the state totals. At times discussions can get bogged down into Portland versus the rest of the state and I hesitate to even post this chart, but it’s important to keep our facts straight here. The Portland region — the 5 Oregon counties that are part of the official Portland MSA — accounts for nearly half of Oregon’s population (48%), more than half of the jobs (54%), and a majority of personal income taxes paid by Oregonians (60%). Of course, overall we are one regional economy. Geographic boundaries have no real economic importance. Business to business sales, supply chains, and worker flows are strong across the state and spill across boundaries every single day.

Third, our office keeps receiving inquiries on the timber industry and I think I’ve come up with a new chart that helps drive home at least one of the points we try to highlight. This chart shows timber-related jobs as a share of the local economy and how timber wages compare to the county average wage. At the statewide level, timber jobs pay the same as the average job. However once you get into the heart of the Timber Belt, industry wages remain significantly above average and the sector accounts for a larger share of the local economy. See our previous update for more on the industry, history, and the challenges of replacing these jobs when they’re lost.

 

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Posted by: Josh Lehner | August 9, 2019

Friday Beer Thoughts: Local Demand

Many of the business discussions surrounding beer tend to focus on the number of breweries opening or closing. We use that as a barometer for the health of the sector, including our previous look at industry dynamism. Counting breweries is pretty easy, however it also provides an incomplete picture. The volume of beer produced matters, and what that says about consumer demand for the product. Between the Brewers Association and the OLCC beer reports, we can get a decent look at barrels of beer produced nationwide and here in Oregon. What follows below is a quick look at breweries in Oregon where we are able to measure both the number of breweries and how much beer they are producing that is sold in the state.

As of the start of the year, 32 of Oregon’s 36 counties has an operating brewery. And 30 of these counties have more breweries per capita than the U.S. average. That said, the picture shifts a bit when we take into account how much beer these breweries are actually producing. Just 5 Oregon counties produce more local beer per capita than the U.S. average, however if we focus only on craft beer nationwide and ignore the macro, then 11 Oregon counties outpace the nation.

To me, this speaks to the skewed distribution of brewery production. Focusing just on the beer brewed and sold in the state by Oregon breweries, the 8 largest ones account for half of the total, while the Top 20 account for 75%. I suspect similar patterns are seen elsewhere in the country, where a handful of large breweries account for the majority of sales.

Now, there are a couple ways to look at this. On one hand, the typical brewery in Oregon brews around 500 barrels per year while the average is 3,300. Most breweries in Oregon are small or at least smaller-scale operations. However, on the other hand, a lot of seemingly successful brewpubs are generally in that 400-700 barrels of beer range, using my eyeball econometrics. And I think this is where Oregon has stood out over time. Yes, the state is home to a handful of large, successful breweries with wide-ranging distribution networks. However, the state’s above average number of breweries per capita is all about the hundreds of smaller breweries and brewpubs.

With that said, let’s look at two charts showing county level data in Oregon. First up we can see that the usual suspects stand out in terms of local breweries relative to local population. Hood River (think pFriem, Full Sail, Double Mountain, et al) has 13 times the US average for breweries per capita and nearly 25 times the volume of craft beer produced. Both Deschutes (think Deschutes, 10 Barrel, Boneyard, Crux, Sunriver, et al) and Clatsop (Fort George, Buoy,) are in the 10-15 times the U.S. craft beer average of production, with Tillamook (Pelican) and Wallowa (Terminal Gravity) not far behind. Of course — and this is a topic I’ll return to later in this occasional series — not all of this beer is sold within these counties. These larger breweries sell across the state and also serve as tourism hubs for out-of-town folks visiting, tasting, and going out to eat.

The second chart zooms in on the bulk of the counties to get a clearer picture. Here you can really see that while nearly all Oregon counties have more breweries than the national average, they’re really not producing a ton of beer relative to the local population.

When I’m asked about whether Oregon has too many breweries, my answer is generally no in the context of looking at these local production numbers relative to the local population. Given that most counties are below the U.S. average, I suspect we could see more successful brewpubs, or production breweries with food carts or the like open up in many places. Right now, the number of breweries are equivalent to 5% of all food service establishments across the state. The true number is somewhat lower, but I do not have a good grasp of which breweries do and do not have food options. But the point being, in most communities across the state, this is not a saturated market.

That said, the concern, and one we’re seeing play out locally and nationwide, is that the growth of local, smaller breweries are taking some of the sales that previously went to the larger breweries with bigger distribution. As such, at least to some degree, if Oregon were to see increased brewery production in counties in the second chart, it may come at the expense of the outlier counties in the first chart.

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Posted by: Josh Lehner | August 2, 2019

Fun Friday: Marginal Propensity to Consume

One question our office gets quite frequently about the kicker is what sort of economic impact does it have. After all we are returning hundreds of millions, if not a billion, dollars to taxpayers who likely did not budget the kicker into their household finances. They’re certainly going to spend some of it, increasing consumer spending and stimulating the economy to some degree.

Previously our office used a 2015 study from Carroll, Slacalek, Tokuoka, and White that looked at what economists call the marginal propensity to consume (MPC). If you received $100 today, how much of that would you spend relatively quickly? The answer depends upon a household’s situation in terms of income, savings, wealth and the like.

Well, now is a good time to revisit those MPC estimates given not only is there another kicker in the pipeline but also the first round of Scharfstein v BP West Coast Product settlement checks just hit the mailboxes of 1.7 million Oregonians. See The Oregonian for more on the case, but the checks are for $91.94 each, with a second round coming next summer.

I was first alerted to the settlement checks by Pete Danko of the Portland Business Journal a couple months ago when he was wondering about their economic impact. As it turns out, Carroll et al. do have a somewhat newer and certainly more in-depth paper exploring how MPC changes given the point in the business cycle, and variations on household wealth.

In the table below I mock up some rough estimates of how much of the settlement checks are expected to be spent this year based on two of the model specifications in the new paper. The first is based on household income and the economy being in expansion. The second is based on household income and liquid financial assets which is a better measure of households ability to pay today given illiquid assets, like home equity, are harder to tap if needed.

Note that lower-income households have higher MPC as they are living paycheck-to-paycheck. However research in recent years has found that quite a few higher-income households are also living paycheck-to-paycheck and thus will spend more of their unexpected windfall than previously thought. Carroll et al build this into their liquid asset results, although all of their model specifications find that the economy-wide MPC is higher than their earlier work showed.

That said, much of the settlement checks will still be saved. The macro impacts are relatively small given the size of the overall economy and household decisions. The near-term bump in total consumer spending in Oregon this year due to the settlement checks is in the 0.02-0.04% range. However, if we think Oregonians will spend their unexpected windfall mostly on discretionary items like going out to eat or a new pair of shoes, then we will likely see a noticeable increase (0.1-0.3%) within these categories. Having a little bit of extra money in your pocket is always nice, especially as we head into the weekend. I hope you enjoy yours!

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Posted by: Josh Lehner | July 25, 2019

What Replaces Timber?

Between the mill closure in Coos Bay, downsizing in Forest Grove, and the lively cap and trade discussions, there has been a renewed interest and focus on the timber industry in Oregon. Our office has fielded nearly a dozen requests recently to speak about the industry, historical changes and the outlook. As such, I have fully updated and expanded our office’s Historical Look at Oregon’s Wood Products Industry which we originally published in 2012 and last updated a couple years ago. See those posts for a more complete summary of the industry’s history. An updated full set of slides are at the bottom of this post, but first I wanted to re-up some work that we have touched on a few times over the years.

There’s no question that the loss of good-paying jobs has a big, negative impact on a regional economy. The question is what comes next? The answer depends.

First at the statewide level, Oregon has seen the Changing of the Guard where the high-tech industry has essentially offset the decline of the timber industry. This is good news for Oregon as a whole and many other places around the country that experienced large manufacturing losses did not have something like this to help balance out their economies.

But we know that even if these trends offset at the statewide level they certainly did not at the regional level or for individual workers. In the 1970s, timber was important statewide but particularly so outside of the Portland region. Even so, Portland had a timber concentration two and a half times the national average, but Lane County’s was closer to 20 times and Douglas was 40 times the national average. Timber accounted for 20-30% or more of all jobs in most eastern and southern counties. Fast forward to today where the geographic distribution of high-tech jobs is very different. Nearly 80% of tech jobs today in Oregon are in the tri-county Portland area.

If not tech, what? As discussed before, many consultant studies point toward health care and tourism as growth opportunities for rural communities and those who have lost manufacturing jobs. This does work for some locations but, unfortunately, the successes are not necessarily replicable everywhere due to differences in scenic amenities, logistics, etc and due to the clustering of more advanced medical care in larger population centers. If the neighboring city gets a Level I trauma center, chances are you will not due to the close proximity.

Even so, travel-related industries and health care are growing in most locations due to Americans going out to eat more and an aging population. But these jobs are not always a 1:1 replacement, particularly in terms of wages and skills. As detailed before, the changes we’ve seen among working-age Oregonians without a college degree over the past generation are not good. If we look at the employment situation and how that has changed, a few such Oregonians were able to enter into a high-wage jobs, but the vast majority either ended up in a low-wage job or out of the workforce entirely. Now, a tight labor market today is pulling workers back in, so the situation is improving and not deteriorating every year, but the big picture shifts remain.

Regarding travel and tourism I would draw a distinction as best one can between travel/tourism and outdoor recreation. The former is really about providing services and meeting the needs of people visiting an area. This includes renting bikes, putting roofs over their heads, and feeding them. The economy is naturally creating a lot of these jobs due to Americans traveling and going out to eat.

However outdoor recreation is, for lack of a better description, a more classic business sector that just happens to focus its products and services on customers for outdoor activities. When it comes to insulated bottles, vehicle mounted tents, and the like they are your classic traded sector manufacturing items which can be sold across the country and around the world. The distinguishing line can be fuzzy but I do tend to think about them a bit differently in terms of the nature of the work performed, the local economic impact, and the outlook.

Lastly, the good news for the Timber Belt is that even though it suffered an economic shock on par with what the Rust Belt experienced, people did not pack up and leave in search of better opportunities. Now, some did and Oregon lost population in the early 1980s, but overall this has not been the case. This influx of new residents is good news. People are voting with their feet, saying they want to live in our communities. This also helps support the local economy. For example, while the decline in manufacturing and farm (think forestry here) jobs as a share was comparable, total employment in the Timber Belt has increased more than twice as much as total employment in the Rust Belt over the past generation or two. This is in no small part due to the population gains.

Now these employment gains overall are not always a direct replacement for the lost jobs. And as detailed in our recent look at industrial diversification, part of the reason Oregon’s industrial structure is changing is not just the good growth in new industries, but also the losses in some of our historical strengths. This will have implications for future business cycles here in Oregon and when coupled with local demographics, implications for the different regions with the state as well.

In terms of the outlook, our baseline is for stability and just a little bit of growth as the housing market improves. This stability is expected until something changes, be it a recession, higher harvest levels or the like. I think it’s clear that if we cut more trees, we’d get more jobs. However even if we saw 1970s harvest levels again, we wouldn’t see 1970s employment due to automation and mechanization within the industry.

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Posted by: Josh Lehner | July 18, 2019

More on Migration to Oregon

Last week we updated the basics of migration to Oregon. The post generated quite a few comments and questions. As such I wanted to post an update with a little more information.

First, a common theme among the discussions is what exactly makes Oregon different than the typical state when it comes to population growth. I would say three things. One, Oregon has among the lowest birthrates nationwide. Two, Oregon has an above average sized Baby Boomer cohort, many of which moved here in the 1970s and 1990s. Three, Oregon’s ability to see net in-migration across all age groups and across nearly all states on a consistent basis is what really makes us stand out. There’s a reason only about 1 out of every 3 adults in Oregon today was actually born here.

Second, the sentence “[t]he California migrants disproportionately locate along the coast and in central and southern Oregon” generated a lot of questions as well. I should have explained that one better and I do have a correction to make to it.

What I meant by disproportionate is looking at migration patterns relative to the existing population in Oregon. So if 10% of the state lives in southern Oregon but they see 20% of net migration from California, then I would say Californians disproportionately locate in southern Oregon. Similarly, central Oregon is home to 5% of the state’s population but they see 12% of net migration from California. You can see this in the chart below, along with migration patterns (shares of statewide totals) to Washington and then from all other states.

Now, while a plurality of Californians move to the Portland region, they do not move there at a rate above what you would expect given that the Portland region is basically half of the state. But the Portland region clearly accounts for the vast majority of statewide losses to Washington and statewide gains from the rest of the country.

What you may notice is that the coast does not stand out. In recent years Californians (or migrants more broadly) are not disproportionately moving to the coast. I am correcting the sentence in the previous post. Now, during the housing boom and through the bust’s aftermath, this was definitely true, up until 2012. Since 2013, the share of Californians moving the coast is what you would expect, or lower, given the size of the local population. My apologies for the mistake.

Other items that stand out include that the Willamette Valley sees relatively little migration to or from other states given its size. Apparently not a lot of people around the country pack up and move directly to Albany or Salem. Now, if you look back at the county bubble chart in last week’s post, Oregonians are moving to Albany and Salem at higher rates than Americans more broadly are. The Valley remains an attractive place to live but does not garner the national attention that, say, Bend and Portland do.

Speaking of Bend, central Oregon has seen a net gain from Washington in recent years. This is unusual given that we typically see net losses from all parts of Oregon to Washington. But each of the past few years, central Oregon has gained population from all parts of Washington include the Seattle MSA and southwestern Washington. I will be keeping an eye on this when new data comes out.

Finally, I wanted to post a couple of charts that are updates from work we did six years ago. These look at where in Washington folks from Oregon are moving to and then where in California folks are moving from. These charts don’t show a full regional decomposition but I tried to highlight the important patterns and where some patterns differ.

First up, let’s look at the Oregon outflows to Washington. Overall, a bit more than half of Oregonians who move to Washington move just across the river to southwest Washington. Nearly 90% of Oregonians moving to southwest Washington come from the Oregon side of the Portland MSA. As mentioned last week, these patterns are partly about taxes but also partly about the classic suburban play.

Now, once we get away from Portland, we see different migration patterns. For example, migration to the Seattle region accounts for a larger share and then those moving out of eastern Oregon mostly move across the border into the Tri-Cities or Walla Walla areas. Among the the “Rest of WA” groups, the largest moves there include those to Olympia and Spokane.

Lastly, let’s take a similar look at where in California people moving to Oregon come from. I think the biggest misconception out there is that most California migrants come from the Bay Area. This is just not the case. Most come from Southern California.

Now, the Bay Area is only about 20% of the California population so these migration patterns show the Bay Area punching above its weight, but still a minority overall.

Regarding southern California, more than one-third of these migrants come from LA and nearly one-quarter from San Diego.

Also note that the Rest of California migrants account for a larger share of those moving into southern Oregon. Half of these migrants (16% of the total) come from the very northern California counties, which account for just 1% of California’s population. This speaks to the fact that not very many people move overall, and most of those that do move, do not move very far. This is one reason why the migration flows along the West Coast are so much larger for Oregon than when looking at the other states.

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Posted by: Josh Lehner | July 11, 2019

Migration to Oregon, an Update

In recent months we have discussed the big picture outlook for labor supply, the silver tsunami of retirements, how migration is slowing but remains the key driver of population gains, and how birthrates are dropping and deaths are rising. However, what we haven’t done in some time is update the nuts and bolts on migration. Lately, I have been getting requests for presentations on migration and what follows largely stems from updating some of our office’s standard charts. For more on migration and how it impacts Oregon, see Mark’s Destination Oregon presentation from a few years ago.

First, our standard population chart we include in every presentation we give shows both the number of new Oregonians each year and the growth rate. Even as migration flows returned in the recent years, Oregon is a larger place today so the growth rate remains lower than what we saw in the 1970s and 1990s.

In terms of who moves to Oregon, it is important to keep in mind that migration is for the young. This goes for both those moving into Oregon and those moving out of state. And while Oregon does see a net gain from all age groups, 20- and 30-somethings account for the lion’s share. Our office pays particular attention to those in their root-setting years as this is when most people begin their careers in earnest, settle down, get married, have kids, and buy a house. This matters economically because the 20- and 30-something represent an influx of young, skilled labor for local businesses to hire and grow their operations.

In terms of where migrants are moving from, it typically is everywhere in the country except for Washington. In good times and in bad, more Oregonians move to Washington than Washingtonians move to Oregon. Some of this is likely due to tax policies, but some of this is also the classic suburban play, both of which are greatly influenced by our largest population center being located on the border. Overall, 30-40% of in-migrants typically come from California and then Oregon gains a little bit from every other state. The California migrants disproportionately locate along the coast and* in central and southern Oregon. Migrants from other states tend move in patterns similar to overall population in the state, so mostly to Portland and then the other urban areas as well.

* Since 2013 Californians no longer disproportionately move to the coast. Apologies for the mistake. See this post for more.

Now, among the non-West Coast states, the specifics do vary from year to year and even across data sets. I tend to focus less on any given year and look across time to see larger patterns. The reason is we will occasionally see a big gain from North Carolina or a big loss to Louisiana, but those are not typical and are blips along the way. Additionally different data sets vary as well. Over the past decade the ACS shows mostly losses to Arizona and gains from Idaho, while IRS migration statistics show the exact opposite pattern. Update: In the comments Guy mentions that IRS is probably a better data set given it covers the majority of the population. The ACS is based on a sample and is inherently more noisy. The advantages of the ACS is getting the characteristics of migrants (demographics, employment, income, etc) which the IRS data lacks.

Looking across the state shows which counties are gaining or losing population to other Oregon counties and that nearly all are gaining population from other states. Again this is just a single snapshot in time. Earlier in the expansion, nearly all migrants within Oregon were moving to the Portland MSA as that’s where all the job growth was occurring. Today, as the economy is growing everywhere, migration patterns are a big more spread out and 2 of the big 3 Portland area counties saw net out-migration to other Oregon counties. This is also not typical, but shifts like this are something our office is keeping an eye on. Similarly, Oregon counties rarely experience net out-migration to other states, as such the losses in Harney, Morrow, and Umatilla are likely more noise and less signal but worth monitoring moving forward.

Finally, a friend of our office asked about returnees to Oregon. Or are we seeing more people move back to Oregon after leaving the state earlier in their lives? We lack good data on this but Census data does show which state someone was born in, where they lived last year and where they live this year. This is an incomplete picture of someone’s life, obviously, but it is the data we have available. What we see so far in the Census data is returnees to Oregon are pretty steady both in number and as a share of all in-migrants to the state. Over the past few years 1 out of every 6 migrants to Oregon were born in the state. This includes the fact that 1 out of every 8 Californians moving to Oregon were actually born in Oregon as well.

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Posted in Demographics, Miscellaneous, News, State Comparisons

Posted by: Josh Lehner | June 28, 2019

Friday Beer Thoughts: Industry Dynamism

The beer industry’s slowdown and rising number of closures continues to draw attention. Both Andre Meunier in The Oregonian and Jason Notte in Portland Monthly have really good, local articles in recent weeks. In talking with them and getting updated OLCC data, I have been digging into the latest trends. Over the summer I want to highlight a few of the findings in an occasional series. First up is a look at economic dynamism, or the number of startups and closures.

The low startup rate across the economy has researchers worried. Long-run economic growth typically comes from new ideas and innovations that improve efficiencies and raise productivity. For a variety of reasons, new companies are usually best able to bring these innovations to market. The concern is that without more startups, productivity will grow slowly, keeping a lid on wages and overall economic growth.

Beer is clearly one industry that has bucked the startup trend. However if we look at economic dynamism overall — both the number of startups and the number of closures — beer really isn’t all that different than the rest of the economy. And while we celebrate startups and their innovations, the creative destruction process really is about both ends of the pipe. The closure of less productive, or less responsive firms to changes in the market is an important component to economic growth and productivity. Of course closures, or failures, are terrible for workers, so having adequate training, job placement, and safety net programs is needed.

Now, the fact that economic dynamism is the same in the beer industry as in the typical industry may be surprising. But this can be misleading and due to offsetting factors that we already knew about. The beer industry’s startup rate in Oregon is 40% higher than the economy overall while the closure rate is half that of the rest of the economy. So, on net the overall dynamism is similar but the composition completely different. The question here is how long can these differences last?

The next chart turns these rates into actual brewery counts. Over the past 5 years Oregon has seen 136 new breweries start producing beer, while 40 have ceased operations. On net, Oregon has added nearly 100 breweries in just the past handful of years.*

The beer industry changes seen in every corner of the state is one item that stood out to me. I’m of two minds here. On one hand, every region has seen strong growth in the number of breweries and has also experienced churn. On the other hand, the regional variations are interesting to note as well.

The Portland area is the most dynamic in the state, even in recent years. But who knew that Southwestern Oregon (Coos, Curry, Douglas) has effectively matched the growth and dynamism of Portland over the past 5 years? Or that the suburbs experienced stronger growth and more dynamism than Portland proper? Click here for county-by-county data on startups and closures. Note that the U.S. is off the chart below in large part due to most states playing catch up to Oregon. The industry is clearly spreading out and is no longer confined to a few beer hotspots.

Some final thoughts.

The big question moving forward is to what extent can this continue. Obviously it is hard to say. There are variations across industries, but rarely do we see extreme outliers persist indefinitely outside of monopolies or the like. Specifically I am watching the brewery closure rate. I suspect it cannot remain half that of the overall economy forever. But to get more closures, a few other dominoes need to fall.

In terms of trying to think through the dynamics of a potential bubble and its bursting, I’d first look for market segment saturation (craft beer as % of total beer, beer sales per adult, etc). Next I’d watch the number of startups into that saturated market. After that I’d look for increased price competition as firms struggle to get their slice of the pie. Now, even in a healthy market all of these dynamics are at play every day for individual firms trying to maintain or growth their marketshare. But these dynamics, to me, are some of the key trends to watch for the industry overall.

Now, most of the post above, and the way we typically talk about the beer industry is all based on the number of breweries. What really matters is the volume of beer produced and consumed. In the next post we will look into this a little bit and try to gauge whether we really are at Peak Beer, at least relative to local demand. In a later post, I hope to dive into industry clusters and tourism.

* Note that these counts are based on the actual number of breweries submitting tax returns to OLCC and not based on something like the number of permitted breweries or trade group figures. These counts also involve judgement calls. Some breweries with multiple locations report production separately, while others do not. I do my best to combine figures for each company and do not look at each establishment alone. The one exception being McMenamins which really operate more as a chain of brewpubs. I count each McMenamins that brews beer separately, but do not count the non-brewing locations.

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Posted by: Josh Lehner | June 18, 2019

On the Rise: Single-Person Households

The other week The Wall Street Journal had a fascinating article on the rise of single-person households and how companies are offering and redesigning products to better meet the needs of individuals rather than those of, say, a family of four. Research and consumer spending shows that individuals are willing to pay more per ounce of condiments in a smaller bottle than to buy the giant bottle. Similarly, the warehouse club package of toilet paper is not the right size for a household of one, even if it technically provides the best bang for your buck. Do read the article as it has great information regarding how demographic shifts impact businesses, open up new market opportunities and the like.

However, while the article does try to provide a demographically-balanced tone, I was struck by the primary focus being on young, urban individuals. This may be because they are the most lucrative market opportunities for businesses or that they play a key role in population growth in close-in neighborhoods. Plus, telling the story of financially independent and seemingly successful individuals is overall a positive lens to view demographic and societal changes. But there’s just one issue with this framing. There are more single-person Baby Boomer households today than Gen X and Millennials combined. Talking about delays in household formation, marriage, and births is all well and good and I am guilty of this all the time. However, focusing just on these trends can really misses the forest for the trees.At some point near the middle of the century, single-person Millennials households will overtake their older neighbors in absolute terms, but not for decades to come. The biggest reason for this is where each generation is in their life. In the decade ahead, Millennials will be in their peak family years, or when the share of single-person households is at their absolute lowest. Gen X will begin aging out of their peak family years and into their empty nest years. While Baby Boomers will see an ongoing rise of single-person households, largely due to unpleasant conversation topics including a growing number of divorcees, widows and widowers.

Another factor at play for all ages is the trade-off we face when it comes to housing costs and personal space. It is cheaper to live with roommates, but if we can afford it, we do tend to prefer a bit more privacy and the like. Living by yourself certainly does not have to mean social isolation.

These shifts will have tremendous impacts on the economy and society at large in the decades ahead. More families increases the demand for childcare and education, for example. And a growing number of older households increases demand for caregivers, social workers, assisted living facilities and the like.

But these shifts also have big impacts on housing markets.

  • If we look at the past decade, the growth in single-person households aged 55 or older accounts for 1 out of every 2 new households in Oregon, if we net out the changes across demographic groups. In the Portland region, they account for 1 out of every 3 new households.
  • Our advisors in recent years have noted if you look internationally at places with older population, housing demand actually increases due to changes (declines) in household size.
  • We are clearly seeing this today. Over the past decade the change in the share of older single-person households is equal to 2-3 years worth of new construction in Oregon. As such, supply needs to increase more than it has in the past to account for aging demographics. Offsetting this somewhat, however, are lower household formation rates among younger cohorts.
  • Like society at large, most single-person households are homeowners. According to the American Housing Survey, in the Portland area the average single-person homeowner aged 55 or older lives in a 3 bedroom house they moved into in the late 1990s.

All of the above has led some to conclude that we do not need any more single family homes. We just need to better allocate our existing single family homes to match the needs of households. I, personally, do not believe the first part. Surveys and buying habits continue to show a lot of people do want single family homes. However, I am also on the record noting that one of the benefits of missing middle housing is it better allows aging in place. The way this happens is more options within existing neighborhoods and communities means households and individuals can right size their housing type as their needs change without severing social ties. This is of particular interest because we know that the vast majority of people do not currently downsize; they live in their home until they pass, or move to an assisted living facility in their 80s or 90s.

Finally, a few months ago we had an advisors meeting that focused primarily on homelessness and we were able to bring in speakers to address and educate us on the issue. One of the ideas advocated for and discussed at that time was the concept of providing a property tax incentive (rebate/discount) for someone who shares their home with, or provides a room to a low-income neighbor. The idea being it could be a win-win in the sense that it would open up more housing units for lower income residents to live, and could financially assist homeowners struggling to make ends meet. I know this concept is currently being discussed in the Legislature and our office is not advocating for or against any particular policy. However given it was a topic of conversation in a recent meeting and ties in conceptually with the growing number of single-person households, I just wanted to highlight it as one possibility.

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Posted by: Josh Lehner | June 11, 2019

We are Hiring an Economist, Come Work with Us!

Our office is currently hiring an economist. This newly created position will work with us on all of the research projects and various forecasts our office produces. This ranges from jobs and population to business taxes and crime rates.

We are looking for a new colleague who is as interested in data and research and is as curious about improving both as we are. Do not be scared off by any lack of forecasting experience, but do apply if you have that! Overall we want to work with you if you have analytical skills and are curious to learn how our office approaches research projects, engages stakeholders, and communicates our findings to policymakers and general audiences alike.

This position is designed to be a stepping stone to a senior economist or research position or to gain real, hands-on experience before graduate or professional school.

See here for the official job posting and to apply

Details

Location: Salem (with some telecommute options once you are up to speed)

Pay: $54,800 – $77,000 annually

Deadline to Apply: June 29, 2019

If you have any questions or wish to discuss the position in more detail, please do not hesitate to reach out.

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Posted in Employment, Miscellaneous

Posted by: Josh Lehner | June 4, 2019

Eugene-Springfield Economic and Housing Outlook

This morning I am part of the Springfield Chamber of Commerce’s State of Business Breakfast. Also presenting are Caroline Cummings of Oregon RAIN and Mark Gregory of Oregon SBDC. Should be a great event. My presentation focuses on the statewide economic outlook but I have incorporated some local material as well. What follows is some Lane County specific information.

Like Oregon overall, job growth in Lane County has slowed in recent years as the regional economy begins to approach full employment. However, as we have discussed before, Eugene-Springfield underwent major structural changes during the Great Recession. In particular the manufacturing losses of the RV industry and the chip plant still weigh on economic data today.

The university is a stabilizing force employment-wise and a source of growth overall with rising enrollments increasing consumer spending and spurring new construction.

All of that said, it’s really every other sector driving growth in recent years. These gains are broad based. The regional economy is at an historic high for jobs and the previous jobs gap — difference between the number of jobs and growth in the potential labor force — is effectively closed.

Importantly, economic growth in recent years has finally translated into real income gains. Local drivers of growth mirror statewide patterns. These gains are all about the labor market. More Lane County residents are working, for more hours, and for higher pay. Local inflation-adjusted incomes are back to where they were in the late 1990s and at the height of mid-2000s expansion. When the 2018 Census data is released this fall, I suspect Lane will have reached an all-time high on incomes as well.

Looking forward, the Lane County economy has never been more diversified. Keep in mind that this measure compares the local mix of industries to the nationwide patterns. As such, when a line moves sideways, it means the local economy is diversifying at the same pace as the nation.

Lane County is home to a very high concentration of timber-related firms, in addition to the university, plus a thriving beverage manufacturing sector (mostly breweries). These all stand out when looking at the local industrial structure.

On the flip side, Lane County has relatively low concentrations in finance (Oregon is not a financial hub), construction (slower population growth, but as we will see in a minute, still not enough construction), and professional and technical services (high-wage, white collar jobs).

For more on industrial diversification and the outlook, please see our previous work. But the main point being that a more diverse economy is better able to withstand different types of recessions. Having one key industry is great when that industry is booming (Timber in the 1950-70s, e.g.) but a region suffers considerably when that sector has fallen on hard times. If the proverbial eggs are spread across more baskets, it means when one basket goes down, the rest are better able to withstand the loss and recover.

Lastly, there are two ways to diversify. A region can add more jobs in industries that did not have a large local presence. Or a region can lose jobs in a sector they specialize in. Both types occur and Oregon’s more diversified economy today is not just due to new job growth. While Lane County still has 10x the concentration in timber-related jobs compared to the nation, it used to be 20x the concentration a generation or two ago. As such, the decline of the timber industry and job polarization overall have made Oregon and Lane County’s economy more like the U.S.

The keys to longer-run growth are demographics and housing. The Eugene-Springfield MSA is expected to continue to grow, but at a somewhat slower pace in the years ahead. The regional economy will face the same demographic headwind the rest of urban Oregon, and the Willamette Valley faces. Working-age population growth will be positive, but slower than total population growth as the Baby Boomer retirements weigh on the local workforce numbers. As discussed before, there are some discrepancies between local demographic forecasts, suggesting Lane may have more demographic upside risk than most.

All of that said, the region will still need to build significantly more housing in order to accommodate gains seen in recent years and their future neighbors in the years to come. Taking Portland State’s population forecast and turning it into household projections reveals Lane County needs to build around 1,400 units per year in the decade ahead, even with a moderate recession (solid lines). While this level of new construction, or more, was seen basically every year throughout the 1990s, the last time Lane permitted this many units was 2006. And the past decade hasn’t been close. More new construction is a must.

Today Lane County, like Oregon overall, is building 1 new housing unit for every 3 new residents. Historically we built 1 new unit for every 2 new residents in Oregon. At some point, something has to give here. So far the answer to that something is affordability. The concern is that affordability could put Oregon’s comparative advantage at risk, or our ability to attract and retain working-age households. 

For more information on Lane County’s economy, see the great work that Employment’s regional economist Brian Rooney does.

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